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some chatter on the National Energy Guarantee and our clouded energy future

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Sanjeev Gupta – making things happen

Canto: I think we need to get our heads around the National Energy Guarantee, the objections to it, and the future of energy in Australia – costs, viability, environmental issues and the like.

Jacinta: Oh no. So what is the National Energy Guarantee?

Canto: Well if we go to the government’s website on this we’ll get a spinned version, but it’s a start. They say it’s an attempt to guarantee reliability, affordability, baseload security, reduced emissions  and further investment into the nation’s energy system. They describe it as a market-based, technology-neutral response to the Finkel Review. They estimate a savings of around $120 between 2020 and 2030.

Jacinta: Sounds a bit vague.

Canto: Well there’s quite a bit of vagueness on their website frankly, but they present information on future projects, such as Snowy 2.0, which sound exciting but we’ll have to wait and see.

Jacinta: So, going to our favourite website on these matters, Renew Economy, I find outrage from the renewable energy sector about the latest government decision on the NEG:

Federal Coalition MPs voted on Tuesday [August 14] to support the National Energy Guarantee that proposes to ensure no new investment in large-scale wind, solar or battery storage for nearly a decade, and also expressed their support for a new government initiative they hope will support new coal-fired generation.

A lot of the critics’ ire is directed at modelling by the ESB (Energy Security Board) – established a year ago ‘to coordinate the implementation of the Finkel reform blueprint’ – which fails to account for major state and corporate investments in renewables.

Canto: And apparently the claimed savings to the consumer are partly based on the reduced cost of renewables which the federal government wants no part of! It’s like not having their cake but eating it too. Interested parties and opposition leaders have asked to see the modelling, and have received nothing beyond a single spreadsheet.

Jacinta: And since we’ve been talking about the OECD lately, this new NEG’s target for renewables puts us behind the majority of OECD nations. Only five of them – including the USA and Canada – have lower targets than us. And yet the potential for reduced emissions here is greater than just about anywhere else.

Canto: Well it’s no wonder that states such as Victoria and Queensland are unwilling to sign up. They have major renewable energy plans in store, and are challenging what would seem to be a baseless federal assumption, that bringing prices down means excluding renewables. In fact the Feds are quite contradictory and confused on the subject.

Jacinta: Well there’s a good chance the conservatives will get rolled at the next election, so I’m hoping that Federal Labor have all their energy plans ready. And speaking of optimism, here in South Australia we’re apparently still on target to be 100% renewable, energy-wise, by 2025. The AEMO has made this prediction in its Integrated Systems Plan, which is a 20-year blueprint for renewables around the country. There are quite a few projects being developed here in SA, including a 280 MW solar plant in Whyalla, courtesy of British billionaire Sanjeev Gupta…

Canto: Yes, Gupta has argued that the Federal proposal, or promise, to underwrite new power stations, which the conservatives have seized on as a way of advancing the coal agenda, can actually be used to build more solar farms with storage – what he calls ‘firm solar’. I don’t think it’s going to be much of a battle though. There’s no appetite for investing in new coal power stations among the cognoscenti. And another company looking to take advantage of the underwriting mechanism is Genex, which is building solar and hydro projects in Queensland.

Jacinta: Yes, the conservative dinosaurs can bellow all they like, and they may even have some popular appeal, but the smart developers and investors are the ones who’ll carry the day, and they won’t be investing in coal. Anyway, Gupta has very ambitious, transformative plans for Australia’s energy system, which he sees – irony of ironies – as being green-lighted by the Federal underwriting proposal, which is neutral as to the source of the energy used. I don’t know how all this works out financially, but obviously Gupta does, and he’s suggesting we could become a truly cheap energy producer, particularly in solar. He envisions 10GW of solar capacity across the country. He’s also keen to build electric vehicles in Australia, which we may have mentioned before, though maybe not in South Australia, which was the original idea.

Canto: And he’s also planning a storage battery near Port Augusta, due to commence later this year, which will out-biggen the recent Tesla battery. And speaking of the Tesla battery, which has been in operation for around nine months now, it might be worth having a look at how successful, or not, it has been.

Jacinta: Well, I’ve found an analysis of its first four months of operation here, on a blog called Energy Synapse, though it’s a bit difficult to follow. It points out that the battery has two essential purposes; first, to provide stability to the grid, and second, to ‘trade in and arbitrage the energy market’. Energy Synapse was only looking at its success in trading. I would’ve thought its first role was more important, but I suppose that’s because I’m not much of a trader.

Canto: What does arbitrage mean?

Jacinta: Well, it’s about trading in a commodity with a fluctuating price. The key for making a quid, of course, is to buy low and sell high. In the battery’s case, you have to buy energy to recharge it, and you sell it to the grid when need arises. That may not be something under your control, so I’m not sure how you can successfully arbitrage in such a situation. From what I can work out, during the period December to March, the battery was getting plenty of use. December can largely be ruled out as a testing period, but January – a high volatility period – and February were pretty successful, March less so. Estimated net revenue for the 4-month period was $1.4 million, which sounds pretty good to me. But presumably the summer months are better for the battery as that’s when the grid is under greatest pressure? It would be great to have a measure of its performance over the winter. In fact, a full 12 month review would probably be necessary, if not sufficient, for testing how well it trades. But the battery’s efficiency, its rapid response time and proven capability in smoothing out the effects of outages elsewhere, has captured the attention of the public and of other investors. People and companies much smarter and more onto this ball than I am, are getting into big batteries – not just Gupta’s Simec Zen Energy, but CWP Renewables in Victoria, and individuals throughout the country who are installing home battery storage to combine with solar.

Canto: And very recently the federal government has been under attack from its ultra-conservative wing for providing any comfort at all to the clean energy sector, and it’s even possible that the Prime Minister will lose his job over it. It’s bemusing to me that a party which always claims to be the pro-business party is at odds with the business community over this, with Abbott arguing for a hostile takeover of AGL’s Liddell coal-fired power station – a kind of nationalisation… It seems Abbott wants the whole nation to be operated on what he calls ‘reliable baseload power’, essentially from coal.

Jacinta: Well, NSW seems to be going through the horrors at present regarding reliable energy. Its a state heavily reliant on black coal, and it’s been suffering power shortages recently because power stations are undergoing maintenance or units are non-operational. It seems the dependence of industry on a few key providers is causing problems, and dispatchable supply from solar and wind is variable. It seems that leadership in co-ordinating the state energy system is lacking. And of course, that’s where Abbott is coming from. So maybe he’s half-right, he’s just hampered by his pro-coal, anti-renewables tunnel vision.

Canto: Meanwhile the NEG is being roundly criticised, indeed summarily dismissed, by all and sundry, and all we can really be sure of is that leadership in the field of energy will come from particular state governments and private corporations for the foreseeable future.

References

https://www.afr.com/news/sanjeev-gupta-crashes-negplus-coal-party-with-14b-green-energy-plan-20180817-h144kr

https://reneweconomy.com.au/gupta-accc-underwriting-idea-may-help-slash-solar-costs-to-20s-mwh-19171/

https://energysynapse.com.au/south-australia-tesla-battery-energy-market/

https://theconversation.com/a-month-in-teslas-sa-battery-is-surpassing-expectations-89770

https://www.smh.com.au/business/markets/tomago-aluminium-warns-of-energy-crisis-as-power-supply-falters-20180608-p4zkbw.html

https://reneweconomy.com.au/full-absurdity-of-national-energy-guarantee-laid-bare-75082/

Written by stewart henderson

August 20, 2018 at 12:38 pm